A quiet day before next week’s key data releases

Currencies Direct April 25th 2014 - 2 minute read

Yesterday (24 April) in Europe the IFO report came in at 111.2 versus 110.5 expected – an improvement from last month. Positive fundamental mood prevailed in Germany and orders were full, with exports doing well and capital goods sector performing strongly. As a result of the positive reading, the consensus view among analysts now is that the European Central Bank's officials will not consider a move towards a more accommodative policy until June as data from Germany has not shown any deterioration and therefore the pressure to act has been greatly reduced.

The ECB President Mario Draghi in his speech yesterday did not provide any surprise as he reaffirmed the key policy points that he has been making for the past few months i.e. the central bank stands ready to use all tools at its disposal including negative interest rates and QE in order to combat deflationary threats.

Despite relatively healthy economic data, the dollar traded lower yesterday. Durable goods rose 2.6% in March which is the largest increase since November. Jobless claims rose to 329,000 from 304,000 but it remains relatively low at 317,000. The US dollar received very little support from this week's better than expected data and the decline in yields confirm that investors don't expect the Federal Reserve to change their accommodative monetary policy stance. Scheduled for release today is the University of Michigan's consumer sentiment survey. Next week will be busy and provide more volatility in the market as first quarter GDP, ISM, FOMC rate decision and non-farm payrolls are all scheduled for release.

The main piece of data out of the UK today is the retail sales report. According to the Confederation of British Industry, retail sales rebounded strongly in the month of April thanks to spending over the Easter holiday. Todays' report is unfortunately the one for March and not April and this survey along with BRC retail sales monitor reported a steep decline in spending in March so the pound might be vulnerable to profit taking if retail sales disappoint to the downside.

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